The financial crisis we are facing today arises from the fact that there is almost no more social, cultural, natural, and spiritual capital left to convert into money. Centuries of near-continuous money creation have left us so destitute that we have nothing left to sell. Our forests are damaged beyond repair, our soil depleted and washed into the sea, our fisheries fished out, and the rejuvenating capacity of the earth to recycle our waste saturated. Our cultural treasury of songs and stories, of images and icons, has been looted and copyrighted. Any clever phrase you can think of is already a trademarked slogan. Our very human relationships and abilities have been taken away from us and sold back, so that we are now dependent on strangers, and therefore on money, for things few humans ever paid for until recently: food, shelter, clothing, entertainment, child care, cooking. Life itself has become a consumer item.

Today we sell away the last vestiges of our divine endowment: our health, the biosphere and genome, even our own minds. Pythagoras’s dictum, “All things are number,” has nearly come true: the world has been converted into money. This is the process that is culminating in our age. It is almost complete, especially in America and the “developed” world. In the “developing” world (notice how these terms assume our own economic system as the destination of other societies) there still remain people who live substantially in gift cultures, where natural and social wealth is not yet the subject of property. Globalization is the process of stripping away these assets, to feed the money machine’s insatiable, existential need to grow. Yet this strip-mining of other lands is running up against its limits too, both because there is almost nothing left to take and because of growing pockets of effective resistance.

The result is that the supply of money — and the corresponding volume of debt — has for several decades outstripped the production of goods and services that it promises. It is deeply related to the problem of overcapacity in classical economics. To defer the Marxian crisis of capital — a vicious circle of falling profits, falling wages, depressed consumption, and overproduction in mature industries — into the future, we must constantly develop new, high-profit industries and markets. The continuation of capitalism as we know it depends on an infinite supply of these new industries, which essentially must convert infinite new realms of social, natural, cultural, and spiritual capital into money. The problem is that these resources are finite, and the closer they come to exhaustion, the more painful their extraction becomes. Therefore, contemporaneous with the financial crisis we have an ecological crisis and a health crisis. They are intimately interlinked. We cannot convert much more of the earth into money, or much more of our health into money, before the basis of life itself is threatened.

An ancient Chinese myth helps illuminate what is happening. There was a monster, it is said, called the tao tie, which was possessed of an insatiable appetite. It consumed every creature around it, even the earth itself, yet it was still hungry. So it turned finally to its own body, eating its arms, legs, and torso, leaving nothing but the head.

A head cannot live without its body. Faced with the exhaustion of the nonmonetized commonwealth that it consumes, financial capital has turned to devour its own body: the industrial economy that it was supposed to serve. If income from production of goods and services is insufficient to service debt, then creditors seize assets instead. This is what has happened both in the American economy and globally. Mortgages, for example, were originally a path toward owning your own home free and clear, starting with 20 percent equity. Today few ever dream of actually one day repaying their mortgage, but only of endlessly refinancing it, in effect renting the house from the bank. Globally, Third World countries find themselves in a similar situation, as they are forced to sell off national assets and gut social services under IMF austerity programs. Just as you might feel your entire productive labor is in the service of debt repayment, so is their entire economy directed toward producing commodity goods to repay foreign debt.

IMF austerity measures are exactly analogous to a court-imposed debt-payment plan. They say, “You are going to have to make do with less, work harder, and devote a greater proportion of your income to debt payments. You will give me everything you own and turn over all your future earnings to me!” Worker pensions, teacher salaries, minerals, oil-all are turned to debt service. The forms of slavery have changed over the years, but not the essential directive. The irony is that in the long term, austerity measures don’t even benefit the creditors. They choke off economic growth by reducing consumption, demand, and business investment opportunities. Jobs evaporate, commodity prices fall, and the debtor people and nations are less able than ever to make their payments.

Incapable of thinking beyond the short term, the money interests love austerity because the debtor is essentially saying, “We will devote more of our labor and resources toward the servicing of debt.” It allows unserviceable debts to be serviced just a little while longer. This is what is happening in Europe at the time of this writing (2010), as governments slash pensions and agree to privatize social services so that they can assure bondholders that they will be paid. The rumblings of austerity are audible here in America too, in the form of alarums about the federal deficit. From within the logic of bond markets and budget deficits, the case for greater fiscal responsibility is unassailable. From outside that logic, it is absurd: are we to be forced by mere numbers, mere interpretation of bits, to erode the standard of living of the many for the sake of preserving the wealth of the few?

Eventually, debtors run out of disposable income and seizable assets. The crash underway today should have actually happened many years ago, except that various phony and inflated assets were created to keep it going a little longer as the financial tao tie cannibalized itself, covering debt with more debt. The efforts to shore up this edifice cannot work, because it must keep growing — all those debts bear interest. Yet the authorities keep trying. When you hear the phrase “rescue the financial system,” translate it in your mind into “keep the debts on the books.” They are trying to find a way for you (and debtor nations too) to keep paying and for the debt to keep growing. A debt pyramid cannot grow forever, because eventually, after all the debtors’ assets are gone, and all their disposable income devoted to debt payments, creditors have no choice but to lend debtors the money to make their payments. Soon the outstanding balance is so high that they have to borrow money even to pay interest, which means that money is no longer flowing, and can no longer flow, from debtor to creditor. This is the final stage, usually short, though prolonged in our day by Wall Street’s financial “wizardry.” The loans and any derivatives built on them begin to lose their value, and debt deflation ensues.

Essentially, the proximate financial crisis and the deeper growth crisis of civilization are connected in two ways. Interest-based debt-money compels economic growth, and a debt crisis is a symptom that shows up whenever growth slows.

The present crisis is the final stage of what began in the 1930s. Successive solutions to the fundamental problem of keeping pace with money that expands with the rate of interest have been applied, and exhausted. The first effective solution was war, a state that has been permanent since 1940. Unfortunately, or rather fortunately, nuclear weapons and a shift in human consciousness have limited the solution of endless military escalation. War between the great powers is no longer possible. Other solutions — globalization, technology-enabled development of new goods and services to replace human functions never before commoditized, technology-enabled plunder of natural resources once off limits, and finally financial autocannibalism — have similarly run their course. Unless there are realms of wealth I have not considered, and new depths of poverty, misery, and alienation to which we might plunge, the inevitable cannot be delayed much longer.

The credit bubble that is blamed as the source of our current economic woes was not a cause of them at all, but only a symptom. When returns on capital investment began falling in the early 1970s, capital began a desperate search for other ways to maintain its expansion. When each bubble popped — commodities in the late 1970s, S&L real estate investments in the 1980s, the dotcom stocks in the 1990s, and real estate and financial derivatives in the 2000s — capital immediately moved on to the next, maintaining an illusion of economic expansion. But the real economy was stagnating. There were not enough needs to meet the overcapacity of production, not enough social and natural capital left to convert into money.

To maintain the exponential growth of money, either the volume of goods and services must be able to keep pace with it, or imperialism and war must be able to escalate indefinitely. All have reached their limit. There is nowhere to turn.

Today, the impasse in our ability to convert nature into commodities and relationships into services is not temporary. There is little more we can convert. Technological progress and refinements to industrial methods will not help us take more fish from the seas-the fish are mostly gone. It will not help us increase the timber harvest — the forests are already stressed to capacity. It will not allow us to pump more oil — the reserves are drying up. We cannot expand the service sector — there are hardly any things we do for each other that we don’t pay for already. There is no more room for economic growth as we have known it; that is, no more room for the conversion of life and the world into money. Therefore, even if we follow the more radical policy prescriptions from the left, hoping by an annulment of debts and a redistribution of income to ignite renewed economic growth, we can only succeed in depleting what remains of our divine bequest of nature, culture, and community. At best, economic stimulus will allow a modest, short-lived expansion as the functions that were demonetized during the recession are remonetized. For example, because of the economic situation, some friends and I cover for each other’s child care needs, whereas in prosperous times we might have sent our kids to preschool. Our reciprocity represents an opportunity for economic growth: what we do for each other freely can be converted into monetized services. Generalized to the whole society, this is only an opportunity to grow back to where we were before, at which point the same crisis will emerge again. “Shrink in order to grow,” the essence of war and deflation, is only effective, and decreasingly so, as a holding action while new realms of unmonetized social and natural capital are accessed.

The current problem is therefore much deeper than today’s conventional wisdom holds. Consider this typical example from a financial journal:

“[Paul] Volcker is right. The collateralized debt obligations, collateralized mortgage-backed securities, and other computer-spawned complexities and playthings were not the solutions to basic needs in the economy, but to unslaked greed on Wall Street. Without them, banks would have had no choice but to continue to devote their capital and talents to meeting real needs from businesses and consumers, and there would have been no crisis, no crash, and no recession.”(1)

This describes only the most superficial level of a deeper problem of which the collateralized debt obligations (CDOs) and so forth are mere symptoms. The deeper problem was that there were insufficient “real needs” to which banks could devote their capital, because only those needs that will generate profits beyond the interest rate constitute valid lending opportunities. In an economy plagued by overproduction, such opportunities are rare. So, the financial industry played numbers games instead. The CDOs and so on were a symptom, not a cause, of the financial crisis that originated in the impossibility of economic growth keeping pace with interest.

Various pundits have observed that Bernard Madoff’s Ponzi scheme was not so different from the financial industry’s pyramid of mortgaged-based derivatives and other instruments, which themselves formed a bubble that, like Madoff’s, could only sustain itself through an unceasing, indeed exponentially growing, influx of new money. As such, it is a symbol of our times — and even more than people suppose. It is not only the Wall Street casino economy that is an unsustainable pyramid scheme. The larger economic system, based as it is on the eternal conversion of a finite commonwealth into money, is unsustainable as well. It is like a bonfire that must burn higher and higher, to the exhaustion of all available fuel. Only a fool would think that a fire can burn ever-higher when the supply of fuel is finite. To extend the metaphor, the recent deindustrialization and financialization of the economy amount to using the heat to create more fuel. According to the second law of thermodynamics, the amount created is always less than the amount expended to create it. Obviously, the practice of borrowing new money to pay the principal and interest of old debts cannot last very long, but that is what the economy as a whole has done for ten years now.

Yet even abandoning this folly, we still must face the depletion of fuel (remember, I mean not literal energy sources, but any bond of nature or culture that can be turned into a commodity). Most of the proposals for addressing the present economic crisis amount to finding more fuel. Whether it is drilling more oil wells, paving over more green space, or spurring consumer spending, the goal is to reignite economic growth — that is, to expand the realm of goods and services. It means finding new things for which we can pay. Today, unimaginably to our forebears, we pay even for our water and our songs. What else is left to convert into money?

As far as I know, the first economist to recognize the fundamental problem and its relation to the money system was Frederick Soddy, a Nobel laureate and pioneer of nuclear chemistry who turned his attention to economics in the 1920s. Soddy was among the first to debunk the ideology of infinite exponential economic growth, extending the reasoning of Thomas Malthus beyond population to economics. Herman Daly describes Soddy’s view succinctly:

“The idea that people can live off the interest of their mutual indebtedness … is just another perpetual motion scheme — a vulgar delusion on a grand scale. Soddy seems to be saying that what is obviously impossible for the community — for everyone to live on interest-should also be forbidden to individuals, as a principle of fairness. If it is not forbidden, or at least limited in some way, then at some point the growing liens of debt holders on the limited revenue will become greater than the future producers of that revenue will be willing or able to support, and conflict will result. The conflict takes the form of debt repudiation. Debt grows at compound interest and as a purely mathematical quantity encounters no limits to slow it down. Wealth grows for a while at compound interest, but, having a physical dimension, its growth sooner or later encounters limits.” (2)

This association of economic growth with resource consumption is especially common today among Peak Oil theorists, who forecast economic collapse as oil production begins its “long descent.” Their critics contend that economic growth can and does happen independent of energy use, thanks to technology, miniaturization, efficiency improvements, and so on. Since 1960, U.S. economic growth has outstripped energy use, a trend that accelerated in the 1980s. (See Figure 1.) Germany has done even better, having essentially flat energy use since 1991 despite considerable economic growth. However, this objection only illustrates a larger point. Yes, it is possible to maintain economic growth by displacing it from the consumption of one part of the commons to another-by burning gas instead of oil or by commoditizing human services or intellectual property instead of the cod fishery-but aggregated over the totality of the social, natural, cultural, and spiritual commons, the basic argument of Peak Oil remains valid. Instead of Peak Oil, we are facing Peak Everything.

When the financial crisis hit in 2008, the first government response, the bailout and monetary stimulus, was an attempt to uphold a tower of debt upon debt that far exceeded its real economic foundation. As such, its apparent success was temporary, a postponement of the inevitable: “pretend and extend,” as some on Wall Street call it. The alternative, economic stimulus, is doomed for a deeper reason. It will fail because we are “maxed out”: maxed out on nature’s capacity to receive our wastes without destroying the ecological basis of civilization; maxed out on society’s ability to withstand any more loss of community and connection; maxed out on our forests’ ability to withstand more clear-cuts; maxed out on the human body’s capacity to stay viable in a depleted, toxic world. That we are also maxed out on our credit only reflects that we have nothing left to convert into money. Do we really need more roads and bridges? (3) Can we sustain more of them, and more of the industrial economy that goes along? Government stimulus programs will at best prolong the current economic system for two or three years, with perhaps a brief period of growth as we complete the pillage of nature, spirit, body, and culture. When these vestiges of the commonwealth are gone, then nothing will be able to stop the Great Unraveling of the money system.

Although the details and timeline of this unraveling are impossible to predict, I think we will first experience persistent deflation, stagnation, and wealth polarization, followed by social unrest, hyperinflation, or currency collapse. At that moment, the alternatives we are exploring today will come into their own, offering an opportunity to build a new and sacred economy. The farther the collapse proceeds, the more attractive the proposals of this book will become.

In the face of the impending crisis, people often ask what they can do to protect themselves. “Buy gold? Stockpile canned goods? Build a fortified compound in a remote area? What should I do?” I would like to suggest a different kind of question: “What is the most beautiful thing I can do?” You see, the gathering crisis presents a tremendous opportunity. Deflation, the destruction of money, is only a categorical evil if the creation of money is a categorical good. However, you can see from the examples I have given that the creation of money has in many ways impoverished us all. Conversely, the destruction of money has the potential to enrich us. It offers the opportunity to reclaim parts of the lost commonwealth from the realm of money and property.

We see this happening every time there is an economic recession. People can no longer pay for various goods and services, and so have to rely on friends and neighbors instead. Where there is no money to facilitate transactions, gift economies reemerge and new kinds of money are created. Ordinarily, though, people and institutions try to hang on to the old ways as long as possible. The habitual first response to economic crisis is to make and keep more money — to accelerate the conversion of anything you can into money. On a systemic level, the debt surge is generating enormous pressure to extend the commodification of the commonwealth. We can see this happening with the calls to drill for oil in Alaska, commence deep-sea drilling, and so on. The time is here, though, for the reverse process to begin in earnest-to remove things from the realm of goods and services and return them to the realm of gifts, reciprocity, self-sufficiency, and community sharing. Note well: this is going to happen anyway in the wake of a currency collapse, as people lose their jobs or become too poor to buy things. People will help each other, and real communities will reemerge.

Even if you care mostly about the security of your own future, community is probably the best investment you can make. When the financial system unravels, most investments become mere pieces of paper or electronic data files. They derive value only from the web of social agreements that contains and interprets them. Even physical gold doesn’t provide much security when things get really bad. In times of extreme crisis, governments typically confiscate private gold holdings — Hitler, Lenin, and Roosevelt all did so. If even the government falls apart, then people with guns will come and take your gold or any other store of wealth.

I sometimes read the financial website Zero Hedge for its remarkable insight into the pretenses and machinations of the financial power elite. In that website’s dim view, no asset class except physical gold and other physical commodities is safe today. I agree with its logic as far as it goes, but it does not go far enough. If the system breaks down to the point of hyperinflation, then the institution of property — as much a social convention as money is — will break down too. In times of social turmoil, I can’t imagine anything more dangerous than possessing a few hundred ounces of gold. Really the only security is to be found in community: the gratitude, connections, and support of the people around you. If you have wealth now, I recommend, as your investment advisor, that you use it to enrich the people around you in lasting ways.

In the meantime, before the collapse of the current system, anything we do to protect some natural or social resource from conversion into money will both hasten the collapse and mitigate its severity. Any forest you save from development, any road you stop, any cooperative playgroup you establish; anyone you teach to heal themselves, or to build their own house, cook their own food, or make their own clothes; any wealth you create or add to the public domain; anything you render off-limits to the world-devouring Machine will help shorten the Machine’s life span. And when the money system collapses, if you already do not depend on money for some portion of life’s necessities and pleasures, then the collapse of money will pose much less of a harsh transition for you. The same applies on the social level. Any form of natural wealth, whether biodiversity, fertile soil, or clean water, and any community or social institution that is not a vehicle for the conversion of life into money, will sustain and enrich life after money.

I am referring to money as we know it. I will soon describe a money system that does not drive the conversion of all that is good, true, and beautiful into money. It enacts a fundamentally different human identity, a fundamentally different sense of self, from what dominates today. No more will it be true that more for me is less for you. On a personal level, the deepest possible revolution we can enact is a revolution in our sense of self, in our identity. The discrete and separate self of Descartes and Adam Smith has run its course and is becoming obsolete. We are realizing our own inseparability, from each other and from the totality of all life. Usury belies this union, for it seeks growth of the separate self at the expense of something external, something other. Probably everyone reading this book agrees with the principles of interconnectedness, whether from a spiritual or an ecological perspective. The time has come to live it. It is time to enter the spirit of the gift, which embodies the felt understanding of nonseparation. It is becoming abundantly obvious that less for you (in all its dimensions) is also less for me. The ideology of perpetual gain has brought us to a state of poverty so destitute that we are gasping for air. That ideology, and the civilization built upon it, is what is collapsing today.

Resisting or postponing the collapse will only make it worse. Finding new ways to grow the economy will only consume what is left of our wealth. Let us stop resisting the revolution in human beingness. If we want to outlast the multiple crises unfolding today, let us not seek to survive them. That is the mind-set of separation; that is resistance, a clinging to a dying past. Instead, let us shift our perspective toward reunion and think in terms of what we can give. What can we each contribute to a more beautiful world? That is our only responsibility and our only security.

I will develop this theme — right livelihood and right investing — later in this book. We can engage in conscious, purposeful money destruction in place of the unconscious destruction of money that happens in a collapsing economy. If you still have money to invest, invest it in enterprises that explicitly seek to build community, protect nature, and preserve the cultural commonwealth. Expect a zero or negative financial return on your investment-that is a good sign that you are not unintentionally converting even more of the world to money. Whether or not you have money to invest, you can also reclaim what was sold away by taking steps out the money economy. Anything you learn to do for yourself or for other people, without paying for it; any utilization of recycled or discarded materials; anything you make instead of buy, give instead of sell; any new skill or new song or new art you teach yourself or another will reduce the dominion of money and grow a gift economy to sustain us through the coming transition. The world of the Gift, echoing primitive gift societies, the web of ecology, and the spiritual teachings of the ages, is nigh upon us. It tugs on our heartstrings and awakens our generosity. Shall we heed its call, before the remainder of earth’s beauty is consumed?

3. Some might say that Third World countries do need more roads and bridges to raise their standard of living. Consider, however, that big infrastructure projects, exemplary of World Bank investment, are key to the integration of formerly autonomous economies into the global commodity economy. Perhaps what they need is not more roads and bridges. Perhaps what they need is protection from the depredations of the global commodity economy, of which roads and bridges are an agent.

9 Comments

One of my greatest fears is that this system will find a place to go. There is no where left on Earth for this system to infect, corrupt, and destroy, that’s true.

I think the only wild card left for the Powers That Be (and the most extreme possible one) is going out into space to continue the system and infect the solar system and eventually galaxy with it.

I know that especially now that most meaningful space exploration has been stopped, it seems even more far-fetched than it normally would be, especially because infecting the galaxy with debt and stripping all of its worlds would take so many generations the human mind cannot even really imagine it.

My fear is that that process will be started. (And if it is, I think it will be within the next several decades.) And if the system ever does that, it will finally be able to expand forever…

Fortunately, the kinds of technologies that are necessary for space travel are impossible from the kind of Newtonian paradigms that underlie our economic and political systems. In other words, more and better fuel will never get us into space. Only technologies based on the quantum logic of interconnectedness will work.

Charles, I haven’t read the whole book yet, so maybe you answer the question in another chapter. Do you think that certain technological means of production are more conducive to gift economies than others? For example, do you think that a craft and agrarian mode of production is more conducive to a gift economy than an industial/factory based one? Or do you think that we can continue having centralized factories using materials and energy from global sources and have a gift economy on top of that? If the former, do you think we can actively create such a mode of production, or just let evolutionary forces bring it about?

Hi Luval. I think I do address this question somewhere. Basically I say that we will still need money as long as we have production that requires the coordination of millions of people across vast social spaces, but that this money can embody certain of the qualities of gift (such as anti-hoarding). That said, many production processes are becoming decentralized. But I don’t think ALL of them will be, in the foreseeable future.

Charles, thanks for writing the book (I read most of it, skipped a few chapters in the middle to which I can get back to later). I am asking many of my friends to read it (I gifted it to one already). Would it be possible to correspond with you about a project I would like to create? I didn’t know if this is the place to do it or if some other would be better. Hope the Tedx conference was successful.

There seems to be an error in the paragraph starting “I will develop this theme… ” specifically, I couldn’t make sense out of the sentence starting “Whether or not… ” – when it got to: “taking steps out the money economy.”

Thank you for writing this book. I am rushing thru it as if it were a Dan Brown mystery! But I will read it again with more care, I’m sure.

It is a little hard to understand, that sentence. I think it isn’t clear what I meant by “you can reclaim what was sold away”. It is referring to the stripmining of skills, relationships, etc. and their conversion into money. You can reclaim those by not using money in place of those skills and relationships.

You are a rebellious genius, very similar to Jacque Fresco author of “The Best that Money Can’t Buy” advocating “The Venus Project”, though could you please let people know your views on that techno-integrated Resource-based Economy. Maybe on your blog? Well, I understand (the fear of) how jobs are being taken over by so-called robots, but how drastic could collective consciousness change to make people collaborate in unforseen ways — that “smart eco-technology” becomes part of the new ecological environment, replacing old diversity– as sad as it is to think about– but if humans kept depleting absolutely everything — when would it be appropriate for “artifical life” come to interact with humans– as to replace the lost diversity. I know you mentioned we strive for utopias, never get the promises it held, BUT which “future socities” do you know make sense aside from the transitional methods you propose. THANKS!! Please email me, I want to make a comic book proposal.